Oil, drones and a lost satellite

CAPE TOWN – There is a general consensus, howsoever loosely contrived, that the Cyrillian era of our politics will largely be defined by the stability or volatility as the case may be, of the state of our economy. Such definition is inevitable especially considering the continued weakening of the fundamentals that support the economy’s growth imperative and the complexity of the designs of inclusiveness. His tenure may be long, circumstances permitting and the rumors of nicodemus plots aside. Enjoying an extra year as the President of the ANC and accordingly head of state ahead of the 2019 general elections, two terms in office may potentially see him becoming the longest-serving head of state in South Africa’s democratic dispensation.

For the second time in our democratic history has a President assumed the responsibilities of office purely to mind the economy and its various sophisticated yet treacherous moving bits. The first was President Mbeki. Closing out at about 5 percent gross domestic product (GDP) growth and a sizable fiscal surplus on his egress, our incumbent packs a lot of impressive credentials for the job. Out of fast evolving socio-political factors, he has his task cut out for him, which is also influenced by the policies of the ruling party. And the convergence of awareness of his tasks shaped by global externalities and party mandate, will help him tailor a neat economic suit out of a very complicated and puny political cloth.

The convenient starting point is not really a starting point. It is just convenient. The country’s balance sheet, in whatever manner it is reckoned, has the structure to reflect with some degree of accuracy what and where the nation’s diverse liquid and illiquid assets are. It is an open secret to so many of our compatriots, if not all, that the country does not know what it has. It would have been an impertinent and damning accusation if it was not so shocking. It doesn’t matter in what area, those who must, seem unaware of what it has and therefore too many things lie around unaccounted for, rendering them vulnerable to the long fingers of the morally nimble. This means that for convenience, the consolidation of our balance sheet as a country deserves urgent priority. Some items must be top of that list. Land, minerals, skills, ocean wealth, hydrocarbon concentrations including all our heritage both natural and invented. Or else, the inability to provide for their account would turn the ideal of economic growth intellectually dishonest and plain offending demagoguery.

Schroedinger and his Cat

Oil, coal, gas and torbanite reserves, account for the most potent arsenal in the future of South Africa’s energy sustainability and jointly represent our heritage as people bound by a common fate under a defined geographic location. They each have a unique part to play in the narrative of accessibility to the principal levers of the productive economy. They also help in the accomplishment of our energy ambitions, the creation of surplus and the achieving of the far-reaching goal of inclusiveness. South Africa’s relationship with its hydrocarbon resources is a curious one, almost akin to that of Schroedinger and his Cat. But unlike Schroedinger, the intention to find out is not well manifested. And unlike the Cat, our resources are not both there and not there at the same time.

There must be a plan of action to conclusively determine whether or not we have been naturally endowed with the black gold and its relatives. The signs are all there, and we have adequate Continental Shelf and Exclusive Economic Zone equaling twice the size of the country’s land mass to determine as such. But there is a difference between prosperous countries and South Africa. The former are deterred by nought and none in their bureaucratic structures are allowed to have excuses when pursuing a national ideal. In our case however, we have perfected the all time excuse. And it has to do with lack of capital resources. By the time KZN, the Free State and Mpumalanga announce their own discoveries, only then will we be motivated to draft policies responding to the instantaneity of the moment. Sadly though that such reaction will be inadequate to catch up with the fever pitch activities spurred by such discoveries and their associated rumors.

Shale gas stands to become the gateway to South Africa’s prosperity. Difficult as it may be to discern what all the voices seem to be saying, there is a consistent gripe against shale gas which represents the anthem of the objections. And this is that there is inadequate water to drill for gas in the Karoo. As an adjunct, any drilling in these grounds would adversely affect the aquifers that feed the many veins from which our compatriots in those parts quench their thirst and tend to their farming needs. The first and main objection which is deeply rooted in our meteorological realities, is hardly a shale gas issue. The adjunct is a safety issue to be regulated by fiat. It would seem that if the water issue could be resolved, so much of the psychological resistance may not enjoy theoretic justification . It is not very apparent therefore why abundant ocean water could not be desalinated and transported across the parched flatlands of the great Karoo. It’s transport could also benefit so many of the severely dry locations like Beaufort West, one of the transit frontiers along its path.

Pipeline from Saldanha

After all, when there was a need to construct a 108km pipeline from Saldanha to Milnerton to operationalise the Caltex crude oil refinery, there was no hesitation to do so. Political resolve carried the day. And about that pipeline, we may have to find the paper trail which will settle once and for all who the true owner of that pipeline is. While the usufructuary rights over the pipeline are not in dispute, only the apartheid government can account for the substantive details of the financial arrangements of constructing that pipeline, and accordingly it’s ownership. And time is not on this government side. The company that uses it is up for sale.

The amount of shale formations scattered throughout the Republic are rumored to contain prodigious volumes of hydrocarbon chains both in liquid and fugacious forms. We know because the National Oil Company’s proprietary information which was analyzed by one of the oil marketing conglomerates indicated the presence of these formations. Whoever owns that information would probably become one of the wealthiest companies in the modern era. As mentioned earlier, a consolidated balance sheet can answer that question. In China and in Saudi Arabia, all the oil and hydrocarbon wealth discovered in their countries, belongs to the balance sheets of their respective national oil companies. So is Malaysia and Angola. The examples are many. And there could be different operators for different wells. No matter. The truth is, they still form part of the balance sheet of those companies. Sadly though, in South Africa’s case, whatever mineral wealth there is, there is no holding company to host it in its balance sheet. And there lies the rub.

What is puzzling, however, is that the figures on shale gas reserves swing wildly. They range from 60 trillion cubic feet to 385 trillion cubic feet. Big numbers indeed. For purpose of scale and content, the PetroSA gas well next to Bredarsdorp had a proven 1 trillion cubic feet. Exploited from 1973 or so soon thereafter, it has generously given us gas for an uninterrupted stretch of over four decades. With so much shale gas reserves, these are the years of energy bonanza. And we are on our way out of poverty.

Sometime in the early 2000’s the country had resolved to embark on massive and complicated projects which seemed impossible to undertake at first, including the hosting of the World Cup and the resulting infrastructure. In the early years of the Mbeki administration, a satellite was conceived by the Science Ministry. Together with its partners, they planned, built and launched it into orbit for a lofty and admirable patriotic mission.

Appropriately named Sumbandila, it was trailblazer of South Africa’s technological global ambitions, coming at the heels of another University of Stellenbosch initiative with a group of students a few years earlier. We needed to predict weather patterns and drought, including the speed as well as the extent of the encroaching desertification. The unintended consequence was that the pictures it took reached and captured the country’s rock formations to some depth yet to be determined. This would mean that the government of South Africa has got a lot of mineral satellite exploration data which they can capture into the balance sheet of the country’s only mining company, owned by the Mineral Resources Portfolio, if the process of transition from the Energy Portfolio has completed. Pity that the satellite got lost and remains untraceable to this day. But first, we have to resolve the question as to who owns that data.

While the social compact on shale gas is slowly evolving, our shale oil profile is fully matured. Torbanite is shale oil. It is centered around Gauteng, Mpumalanga and KwaZulu Natal. As far back as 1932, South Africa planned and established a company to extract torbanite to varying measures of success. In 2010, the CEF Group announced that it has certified an approximate $4 billion (R57bn) worth of torbanite. There is no gain saying that if captured into the balance sheet of PetroSA, there is no need to declare the National Oil Company incapable of survival as a going concern, at least if the Auditor General Report of 2018 is anything to go by. And so it is that a country with so much resource lying around, is intellectually incapable of harnessing its endowments into a balance sheet.

Sumbandila may have been lost into the vast unfathomable ether, requiring from all of us a collective resignation just as the rest of humanity accepts the fate of all satellites when they reach the end of their days in space. Irrecoverably! But we shouldn’t despair. There are drones that could perform a similar function, and can deliver on real time all the information on the oceans posed by illegal fishing and poaching in the national parks. Yet imbedded in the potential of the drones, is its capability to host penetrative infra red technology, in the same way as satellites do. And as fortune would have it, we have drone technology in abundance in our republic.

Arguably the obligations attending to the art of politicking on the one hand, and the peremptory of restoring a healthy balance sheet on the other, are different. While politicking is much harder, keeping the balance sheet neat is less complex and more focused. It requires submission to patience, resulting from the natural consequence of the sophistication of the global economic cloth and its national political cost. The act of tailoring an economic suit from its colorful tapestry includes descending into the arena of conflict and fight energy battles in the name of patriotism. As he does so, carving a name for himself in the granite rocks of history, the President’s bequest to prosperity will be a consolidated, auditable, accessible and wealthy balance sheet.

For such Herculean task, it will not do well for our Cyrillian overlord to bring scissors into a gun fight.

Ambassador Bheki Gila is a Barrister-at-Law.

The views expressed here are not necessarily those of Independent Media.